Tuesday, July 21, 2015

MacGill: New ‘revolutionary’ needs to bring markets to account

A “revolutionary” of the calibre of former civil servant and Central Bank governor Dr TK Whitaker is needed to ensure that financial markets take some responsibility for the effect their policies have on the lives of ordinary citizens and taxpayers, the MacGill summer school has heard.

Dr Whitaker’s biographer Anne Chambers noted he had, in the 1950s, undertaken to write the policy document Economic Development on a totally voluntary basis.

He and his team working outside office hours on their own time “without any notion or expectation of monetary or promotional recompense but simply because it was needed to be done”.
“In this age of entitlement, top-ups and bonuses, such civic-minded motivation seems, sadly, somehow anachronistic,” she said.

That “detailed, meticulous and practical” policy document had offered a “radical remedy” - the replacement of non-productive by productive capital expenditure, the introduction of free trade and an end to the isolation and protectionism of a previous era.

“It lowered the barriers Ireland had erected around itself and allowed the Irish people to look at their country, not from some mystic, historically idealised vantage point, but from eye level.
“But above all Economic Development offered hope and a way out of the economic quagmire in which Ireland and its people were fast bound. Economic Development and the First Programme for Economic Expansion, derived from it, led to a period of unparalleled growth and optimism.”
Ms Chambers said she still meets Dr Whitaker, now in his 98th year, once a week.

While he was the first to acknowledge the immense changes that have revolutionised the banking sector, including the globalisation of the industry and the impact of technology, it was difficult to imagine that under his stewardship “the warning light would not have been flashing in Dame Street long before the banking collapse occurred.

It was difficult to imagine that Dr Whitaker would have agreed to the “disastrous decision to separate the supervisory and regulatory functions from the Central Bank”.

Ms Chambers said that during the so-called Celtic Tiger “debacle”, while a diminution in the bank’s authority may well have been the result of European Central Bank intervention, the Irish Central Bank “retained sufficient authority nationally to curb the doubling of house prices, the tripling of credit to the building industry and the sanctioning of loans up to and beyond 100 per cent that occurred in the space of seven years”.

“And with Ken Whitaker on the board of the ECB, (Jean Claude) Trichet would undoubtedly have been faced with an able and determined opponent to his policy of light-touch regulation, leading, as it did, to the inadequate and incompetent supervision of the Irish banking system and to Ireland’s subsequent ‘humiliation’.”

Senator Feargal Quinn told the summer school it had been a joy to get to know Dr Whitaker.
He had changed the world in Ireland and had changed it with “enthusiasm, commitment and energy”, he said.